Tom Ruff of The Information Market is the most knowledgeable guy I know about foreclosures in Maricopa County.
Zillow uses Trustee Deed values
Tom says Zillow currently displays Trustee Deeds as the most recent sale!
Trustee Deeds come from foreclosure auctions (Trustee Sales) and they are certainly not open market transactions. You get a Trustee Deed when you buy a home at a foreclosure auction (Trustee Sale). Banks get a Trustee Deed if no one successfully bids at a foreclosure auction and the bank takes ownership.
Currently, about 95% of these foreclosure auctions end up with the bank taking ownership. That means that about 95% of the time the value shown on Trustee Deeds is the opening bid amount of a FAILED foreclosure auction (Trustee Sale) and does not reflect an open market transaction.
The value given on a Trustee Deed has little to do with the market value of the home. The banks can make the opening bid whatever they want, for example, the banks often make the opening bid the outstanding mortgage amount.
The values shown on Trustee Deeds should not be used in any home price valuation model such as Zillow’s “zestimates” because they are not open market transactions.
Tom says Zillow’s model is “not only naive, it’s dangerous.”
[CORRECTION: Read the comments. Zillow does not include repossessions in calculating the Zestimate but they do at this time display repossessed homes as being sales on their maps of home sales in metropolitan Phoenix. Hopefully, Zillow will correct this soon.]
In the data I use here at Arizona Real Estate Notebook and in my weekly newsletters, Home Sale News, I do not include Trustees Deeds because they are not open market transactions.
In fact, it was the inclusion of Trustee Deeds that caused a brouhaha with the Greater Phoenix home sales data published by Dr. Butler at Arizona State University.